Aug 22, 2007

There are lots of ways to look at service by categories, including by their relationship to “products”. Three categories include: 1) services added to existing products (last week’s issue), 2) services designed into products– this week’s topic), and 3) services independent of products. The “recipe” for successful service design, development, pricing, launch and promotion varies with the category of service.

Just as the old safety razors were useless without their disposable blades, services can supply an essential part of a total solution’s value proposition. How do you design a product and service in true symbiosis – with multiple yet interrelated value propositions?

Most of us have heard of TiVo but what about Teleworld Inc.? This Silicon Valley start-up can teach us a lot about how to accomplish this difficult service birth. According to Randy Komisar, in his book, The Monk and the Riddle, Teleworld was the brainchild of Mike Ramsay and Jim Barton: a home video server that would store incoming electronic information and be linked to a variety of output devices in the home such as Internet appliances and computers. But these innovators quickly realized that the key to success lay in the back-end service required to keep “home servers” working. Such services would include things like a smart program guide, customized viewing based on preferences, variety of services based on “learned” customer preferences. The team at this innovative company, renamed TiVo Inc., went on to revolutionize the home TV viewing market.

“We don’t make any of our set top boxes. Our partners, like Philips, do that. Instead, we focus on the services and programming upgrades, “explained Ted Malone, Director of Product and Service Marketing at TiVo. “The service we provide is not just the smart TV listings. It includes all the back-end technology: software updates, activation and authentication, and technical support logs. Eventually we will add things like Video on Demand or premium content.”

Although not the manufacturer, TiVo, depends on successful sale of set top boxes through retail distribution channels. Only when a customer has a box installed can he become a TiVo service customer. Unlike the hardware, the service is sold directly to the end user. That was one of the service marketing lessons that TiVo developed in its early planning. Another was starting off right with customers. “It was important from the start that we NEVER provide free service. We wanted to be certain to have a true business relationship with all of our customers from the start.” Says Malone.

5 Key ideas

1. Design your product with service in mind

2. Never provide the service for free.

3. Test your assumptions

4. If you can, sell your service directly to your end user

5. Avoid subsidizing the design, production or sale of “reusable” products in a product/service solution unless you can guarantee the viability of back-end service revenue.